Education Loans in India – understanding the basics - Eligibility and limits
Read the article and understand some basic terms and requirements of education loans in India. Who are eligible, the necessary courses and a lot more is explained in the article.
For a majority of parents in India today who wish to provide higher education to their children – both in India and abroad – it has become a necessity to take a loan from a bank or a financial institution to meet the course fees and other related expenditure. With new educational courses being introduced and the ever increasing fees, the education system has become nothing less that a great business venture for the institutes. It is therefore important to understand the fundamentals of education loan system in India .
The education loan scheme is basically aimed at meritorious and financially backward students to enable them to pursue higher education. But in these times of increasing living costs, even the well-earning families encounter financial issues and they too go for education loans.
Who can apply for an education loan in India
The following is the eligibility criteria for getting an education loan :
1. The student must be a citizen of India
2. The student must have got admission for the desired course in a recognized educational institute in India or in another country by means of an entrance exam.
3. If the admission is though an entrance exam, the banks are required to evaluate the reputation of the concerned institute and employability factor.
4. Even if a student is admitted in an institute under management quota, preference is given by banks to meritorious students.
Eligible courses for education loan in India
The following are the courses in India and abroad for which an education loan may be given:
1) For studies in India
• Graduate, Post Graduate or Diploma courses under colleges or universities recognized by the UGC, Government, AIBMS or AICTE, etc.
• Professional courses like Chartered Accountant (CA), Chartered Financial Analyst (CFA), Institute of Cost and Works Accountants of India (ICWA), etc
• Courses offered by IITs, IIMs, NIFT, NID, etc.
• Regular degree or diploma programmes like shipping, aeronautics, pilot training, nursing or other related courses approved by the governing authorities or regulatory bodies.
2) For studies abroad
• For Graduation: Professional and technical courses which are job oriented offered by reputed and recognized universities.
• For Post Graduation: Courses like MS, MCA, MBA, etc.
• Other courses like Certified Public Accountant (CPA) in the US, Chartered Institute of Management Accountants (CIMA) in London, etc.
• Regular degree or diploma programmes like shipping, aeronautics, pilot training, nursing, etc approved by the governing authorities or regulatory bodies in India or abroad for getting employment in India or abroad.
Also See: Various loans available in India and when to use them
Expenses covered under educational loan
• Education fees of the institutes.
• Library, examination and/or laboratory fees.
• Expenses of traveling abroad for higher studies.
• A premium of insurance for the student
• Various deposits like caution deposit, refundable deposit, building fund, etc. The total of these expenses must not exceed 10% of the total loan amount.
• Expenses for buying books, uniforms, computer, instruments, etc. The total of these expenses must not exceed 20% of the total loan amount.
• Miscellaneous expenses like money for project completion, thesis work, study tours, etc.
• If the student is eligible for any scholarship, fees reimbursement, fees waiver, etc, even these factors are taken into account with computing the required loan.
Maximum education loan given by banks in India
• For studies in India: Rs. 10, 00,000 (Maximum)
• For studies abroad: Rs. 20, 00,000 (Maximum)
These limits are decided by the Reserve Bank of India (RBI), but they are not final. Banks do have the power to alter the limit for courses that require funds higher that the prescribed limits.
Recommended: Education Loans in India – understanding the basics- formalities and repayment
Margin money on educational loan in India
Margin money is that part of the loan amount that you need to pay to the bank from your own pocket for the purpose of security. For example, if you are availing a loan of Rs.10 lakh and the bank fixed a margin of 10%, this means that you need to give the bank securities worth 10% of the loan amount i.e. Rs. 1, 00,000. The bank will give a cheque of Rs.10 lakh. Here the bank is providing 90% of the loan amount.
The margin money on educational loans is:
• For loans up to Rs. 4 Lakh – No Margin
• For Loans above Rs. 4 lakh – 5% (For studies in India) and 15% (For studies abroad)
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